It Is Being Reported That Turkish Military Forces Have Entered Syria – 05.31.16

  • There are international news reports that claim that Turkish military forces have entered Syrian territory and have established positions near the towns of Azaz and Afrin.  If these international news reports are true, then Turkey has essentially declared war on the Assad regime.  Back in February, I warned that escalating tensions in the region could be the spark that sets off World War III, but things seemed to cool down a bit in March and April.  However, this latest move by Turkey threatens to take the war in Syria to a whole new level, and everyone will be watching to see how the Russians and the Iranians respond to this ground incursion.
  • So far, it is the Russian media that it taking the lead in reporting about this movement of Syrian forces.  For example, the Sputnik news agency was one of the first to report Turkish military activity around the town of Azaz…

Amid violent clashes between militants of Daesh and troops of the Free Syrian Army (FSA) in the town of Azaz in northern Aleppo district, reports are surfacing suggesting that the Turkish Army units have been seen located in the district of Azaz.

  • In addition, Sputnik claims that Turkish military forces entered a small village called Hamam near the town of Afrin on Saturday…

“Two days ago, the Turkish military entered the village of Hamam in Afrin area. We are ready to repel any attack. Meanwhile, FSA units are suffering serious defeat in clashes with Daesh. They have already lost control of 12 villages. If Daesh comes to Azaz, ‘Democratic Syrian Forces’ will repel the jihadists, and not allow them to enter the city,” Arac stressed.

  • The map that I have posted below comes directly from Google Maps, and it shows how far south of the Turkish border the towns of Azaz and Afrin are…
  • In particular, the Azaz corridor is considered to be extremely important because that is the primary route that Turkey has been using to resupply jihadist rebels in Aleppo.  So Turkey wants to keep that road open at all costs.
  • Meanwhile, an Iranian news source is also reporting on this Turkish incursion into Syria…

Member of the Syrian Kurdish Democratic Union Party (PDS) Ahmet Arac said that the hundreds of the Turkish soldiers crossed the Syrian border at Bab al-Salameh border-crossing and deployed their forces in al-Shahba’a region near Marea and Azaz.

“The Turkish Armed Forces are preparing an offensive in the Azaz and Marea regions that have been the scenes of tough battles between the ISIL terrorists and its rival group of the Free Syrian Army,” Arac added.

“Also yesterday the Turkish Army carried out rocket attacks on the positions of Democratic Forces of Syria,” he went on to say.

Read more at:It Is Being Reported That Turkish Military Forces Have Entered Syria


The “Crazy Growth In Corporate Debt” Is Finally Noticed: Bloomberg Issues Stark Warning, So It Begins – 05.31.16

  • By now it is a well-known fact that corporations have no real way of generating organic growth in this economy, so they are relying on two things to boost share prices: multiple expansion (courtesy of central banks) and debt-funded buybacks (also courtesy of central banks who keep the cost of debt record low), the latter of which requires the firm to generate excess incremental cash. Incidentally, as SocGen showed last year, all the newly created debt in the 20th century has gone for just one thing: to fund stock buybacks.
  • One doesn’t have to be a financial guru to grasp that the problem with this “strategy” is that if a firm is going to continue to add debt to its balance sheet in order to fund buybacks (and dividends), then it needs to be able to generate enough operational cash flow in order to service the debt. Even if one makes the argument that debt is cheap right now, which may be true, or that central banks are backstopping it, which is certainly true in Europe as of the ECB’s shocking March announcement in which the CSPP was revealed, the fact remains that principal balances come due eventually, and while debt can be rolled over, at some point the inability to generate cash from the operations catches up; furthermore even a small increase in rates means the rolling debt strategy is dies a painful death, as early 2016 showed.
  • Then, as we showed to months ago using another stunning chart from SocGen’s Andy Lapthorne, what has gone largely unnoticed in the recent past, is that the differential between the growth rate of net debt and underlying cash flow or EBITDA, now at a staggering 35%, have never been greater. As Andy Lapthorne politely puts it in the chart below, there is “crazy growth in net debt.
  • One also does not have to be financial wizard to to know that a firm which has to borrow more than it can generate from core operations is not a sustainable business model, and yet today’s CFOs, pundits and central bankers do not.

Read more at:The “Crazy Growth In Corporate Debt” Is Finally Noticed: Bloomberg Issues Stark Warning, So It Begins


Brits “Appalled, Disgusted” At Brexit Postal Ballot ‘Fraud’ – 05.31.16

  • “I am appalled by it. It should be neutral,” exclaimed one angry Brit after seeing that Brexit voters are being sent postal ballots with a guide that strongly suggests they should vote for Britain to remain in the European Union.
  • The “How to vote by post” forms were sent out last week…
  • And, as The Telegraph reports, this has prompted furious complaints from anti-EU campaigners, as the step-by-step guide includes advice to “read the instructions carefully, then complete your ballot paper” above an image showing a pencil in a hand ticking a box to “remain a member of the European Union.”
  • “When i first saw these instructions I was disgusted… The Electoral Commission should never have allowed this to be sent.”
  • Experts say there is a risk that the forms could be challenged in court because they appear to guide the choice of voters.

Read more at:Brits “Appalled, Disgusted” At Brexit Postal Ballot ‘Fraud’


Why The Next Black Swan Will Turn Into A Flock – 05.30.16

  • I was on the phone the other day with a friend, who is also my accountant. We’ve been friends going on 30 years. Once in a while our discussions will veer off into what is commonly known as “shop talk” where we find we’ve suddenly gone from “just gabbing” to a multi-hour intense conversation about markets, the economy, and more. This past one was a little more of “the exception” rather than just the average swing into the generic.
  • What I discerned from many of his responses was just how inadequately prepared, justifiably frightened, as well as, an overwhelming sense of foreboding was lying right below the surface of those many might deem from the outside looking in as people of wealth, industry leaders, or people who are just assumed to be “well off.”
  • What was just as illuminating was how many he explained “are just rolling the dice, thinking nothing could be as bad as 2008.” The additional problem? They think (or believe) if it happens again all they’ll have to do is the same as they did last time e.g. Hunker down, wait for the storm to blow over. Rinse, repeat.
  • The problem (in my opinion) with that thinking is this: What you think you can do this time, has already been severely handicapped or, removed all together. And most have no clue.
  • This is where the real issue lies for not only the Fed per se, but rather, the entire political as it is currently known. For if a “black swan” does indeed hit once again in the very near future? Once people realize just how systematically they’ve been cut off from those “assumed” resources, especially during a crisis? All hell is going to break loose in ways the academic class, as well as, the political never envisioned. For when the time comes (and there is no more important “time” than that during a crisis of confidence) where words truly matter, and everyone no longer believes? Everything changes. And I do mean: everything.
  • The subject which initially fueled the discussion to take off was when I cavalierly made a comment of, “I’ll bet you haven’t even noticed the change on your latest deposit slip from the bank?” To which of course he said, “What change?”
  • I relayed the fact that if you now deposit cash (and “cash” means just that: cash) into your account as per the deposit slip it now reads “Further review may result in delayed availability of this deposit.” (this incident was at Chase™ I’m quite sure it’s at others, and if not, will be coming soon to a bank near you)
  • Or, said differently: “Just because you deposited cash, it no longer means, or can be inferred, as an instant credit to your account which has been the case for years. And that’s a real problem many business people, never mind, your average person are going to find out the consequences of the hard way.”

Read more at:Why The Next Black Swan

“This Is Not The America My Parents Immigrated To In 1957” – 05.30.16

  • Not that I remember what America was like in 1957, as I was not yet five years old. Years later, when I was old enough to understand, they told me their story. Briefly, it goes like this.
 Dad was born in Romania (Czernowitz in Northern Bulovina), but he identified (haha) as German because, well, his dad was German, his mom was German, they spoke German and kept German customs, and lived in a German community so, applying the “quacking duck” theory, that’s what he was. Mom was born in Yugoslavia (now, Slovenia), but she identified as German for the same reasons as dad did. The Nazi regime would refer to folks such as my parents as “Volksdeutsche” —- being German as a people or race, regardless of citizenship. More on that  here.

When dad was about seventeen the Deutsche Wehrmacht (army) made a pit stop in his neck of the woods, and forcibly yanked his ass off the farm, and within a few weeks turned him into a bonafide Mortarman (dudes who launch grenades). He might have destroyed or damaged a Russkie tank or two, but was eventually captured by the Russians, and spent the rest of the war, and some time thereafter, in one of their luxurious prison camps. When mom was a pre-teen the Russian army made a pit stop in her neck of the woods, killed most of her family, but spared her life and put her to work as a slave laborer and sex-toy (cuz she was very pretty), in one of their gulags.

Obviously they both survived this ordeal (otherwise I probably wouldn’t be writing this). However, after the war ended, neither parent was allowed back to their ancestral homes. In order to keep Germans from becoming a “problem” again, Eastern Europe (with approval of all the Western powers) decided to enact a program of ethnic cleansing by expelling as many as 14 million Germans. This German Diaspora comprised the largest migration of any European people in modern history. More here. Many died, estimates range from 500,000 to 2,000,000. My parents survived that as well, obviously.

They arrived as Flüchtlinge (refugees) in an Austrian camp for such people … two Germans as refugees in a German country, how weird is that … found each other, did the nasty posthaste, and produced me, at the time a bastard child mostly unwelcome anywhere. (I’m just glad my dad wasn’t some anonymous Russian soldier!). They gave it their best shot living this way. But, even as late as 1957, there wasn’t enough work in Austria. They felt their future would be better elsewhere. So, they came to America … for work.

  • You do understand the meaning of that last sentence? It means my parents came to America for a selfish reason, as all immigrants do. Sure, the stated reason for most immigrants may be for economic betterment, to escape political repression, or flee religious persecution, and such. But, the ultimate motivating factor is always for the betterment

Merkel’s TTIP policy is ‘wrong:’ German Vice Chancellor criticizes US-EU free trade deal – 05.29.16

  • TTIP Hastiness would lead to an unfavorable agreement, German Vice Chancellor and Economy Minister Sigmar Gabriel said, criticizing Chancellor Angela Merkel’s approach to reaching an agreement with the US on harmonizing trade and investment regulations.
    “It was wrong that, in the euphoria of [President Barack] Obama’s visit to Germany, the Chancellor said that we will be able to conclude negotiations under any circumstances by the end of this year – and that she recently repeated that statement,” Gabriel said in an interview to the German regional RND newspaper group, criticizing Merkel’s stance on negotiations concerning the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US.
    Gabriel, who is the leader of Merkel’s German Social Democratic Party (SPD), also stressed that haste would lead to an unfavorable deal adding that he and his party will “never” agree to something they deem “bad.”
  • “The SPD will not to be part of a bad deal,” he said. “I will never approve an agreement that retains [the right for the companies to appeal to] nontransparent private commercial courts,” he stated, referring to the issue that the agreement would allow transnational corporations to challenge domestic laws and regulations in special tribunals thus potentially undermining national environmental and labor protections.
  • He also stressed that he would not approve any deal that envisages standards deemed lower than those included in the freshly-negotiated EU-Canada Comprehensive Economic and Trade Agreement, which has already been approved by the Council of the European Union and the European Parliament.
  • According to German media, the vice chancellor cast doubts on whether it was still worth negotiating with the US on the TTIP at all.
  • He said that the forthcoming new round of the TTIP negotiations in June will indicate what the US are really aiming for.
  • Gabriel has been subjected to a pressure of his own party members, as the left wing of the SPD wants him to break off negotiations on TTIP, German media suggest.
  • The Economy Minister already criticized TTIP in late April. At that time, he said that the agreement in its current form could ruin the entire free-trade deal and accused the US of violating the norms of free trade as it does not want to “open its public tenders to European companies.”
  • “If the Americans hold fast to this position, we don’t need the free trade treaty. And TTIP will fail,” he warned.

Read more at:Merkel’s TTIP policy is ‘wrong:’ German Vice Chancellor criticizes US-EU free trade deal


Former Morgan Stanley Chief Asia Economist: “Don’t Listen To The Ruling Elite, The World Economy Is In Real Trouble” – 05.29.16

  • Andy Xie says the world’s elite that are attending the G7, G20, Davos and other wasteful meetings are wrong to try to pin the blame for the turmoil on people’s psychology; all signs point to a prolonged period of global stagnation and instability.
  • Before the current G7 meetings waste of time, The G20 working group meeting in Shanghai didn’t come up with any constructive proposals for reviving the global economy and, instead, complained that the recent market turmoil didn’t reflect the “underlying fundamentals of the global economy”. The oil price has declined by 70 per cent since June 2014, while the Brazilian real has halved, and the Russian rouble is down by 60 per cent. The global economy is on the cusp of another recession, and these important people blamed it all on some sort of psychological problem of the people.
  • Over the past two decades, the global economy has been blessed with the entry and participation of 800 million hard-working Chinese, plus the information revolution. The pie should have increased enough in size to make most people happier. Yet, the opposite has happened. The world has gone from one crisis to another. People are complaining everywhere. This is due to mismanagement by the very people who attend the G20 meetings, the Davos boondoggle, and so many other global meetings that waste taxpayers’ money and put inept leaders in the limelight.
  • One major complaint that people have is that the system is rigged – that is, the rising income concentration is not due to free market competition, but a rigged system that favours the politically powerful. This is largely true. The new billionaires over the past two decades have come mostly from finance and property. Few made it the way Steve Jobs or Bill Gates did, creating something that makes people more productive.

Read more at:Former Morgan Stanley Chief Asia Economist: “Don’t Listen To The Ruling Elite, The World Economy Is In Real Trouble”